Urbanization, coupled with an increasing number of nuclear families and rising incomes, are boosting demand for housing in India. Yet there is a serious housing shortage—primarily in underserved urban areas.
IFC is taking steps to increase the availability of housing finance for low-income households. In 2011, we worked with our client Dewan Housing Finance Corp. to launch a first-of-its-kind joint venture by IFC in housing finance in India—Aadhar Housing Finance Pvt. Ltd.
Before the creation of Aadhar, residents of states such as Uttar Pradesh, Orissa, and Madhya Pradesh had very little access to home loans or other financial services. In just one year, the company has achieved its objective of establishing 15 branches in six states to offer home loans to low-income customers. IFC played a key role in mobilizing equity financing and advising Aadhar on responsible financing practices and corporate governance.
The project focuses on customers with household incomes of up to 20,000 rupees a month, or about $400. In its first year of operation, the company processed 1,800 loans from more than 3,300 applications, adding about three new customers a day.
The Aadhar housing project shows that providing mortgages to low-income borrowers can be a successful business—and that loans can also be rolled out on a large scale.